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Lease Terms: Sub-letting your Leasehold Property

Please note that the information herein is of a general nature and you should not act or refrain from acting on it without professional advice on the specific facts of your case. No liability is accepted by the author or Sykes Anderson Perry Limited in respect of this article. Taxation and property law are complex subjects and the above is a basic outline only and is intended only as a general guide. Nothing herein constitutes financial advice.

If you own a leasehold property, it is more than likely that your lease will contain a ‘user covenant’ restricting how it is used, a covenant being a legal promise. A common example would be:

Not to use the premises hereby demised or permit the same to be used for any purpose whatsoever other than as a single private dwelling house in the occupation of the Lessee and his family.

If your user covenant explicitly states that the property should only be occupied by the Lessee, then this could affect you if you intend to sub-let.

In a recent case (Jones and another v Roundlistic Ltd [2018]), the Court of Appeal has held that these user covenants are not unfair contract terms.

In the case, the flat owners had underlet their property without the consent of the Landlord (Freeholder), arguing that their lease did not prevent sub-letting.

The Landlord brought a claim against them for breach of the user covenant, and was successful in the Court of Appeal.

The lesson here is that any subletting of a long lease should only be done after careful consideration of the meaning of the covenants contained in the long lease.

As well as user covenants, the vast majority of leases also contain a covenant to only sub-let with the explicit consent of the landlord, and not to sub-let ‘part only’, i.e. separate rooms to individual tenants.

If you are buying a leasehold property with the intention of letting it out, either immediately or in the future, you should discuss this with your solicitor.

As part of our service at Sykes Anderson Perry we will always report on any such lease covenants for you as a matter of course.

To discuss this or any residential property related matter, please contact Gemma Wright.